Heat Networks (Market Framework) (Great Britain) (Amendment) Regulations 2025

Earl Russell Excerpts

Monday 15th December 2025 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I thank the Minister for his clear and comprehensive introduction to this SI and I welcome the fact that we are getting this long-overdue regulatory framework for heat networks. I agree with him that they are an important part of our energy future. Based on renewable and low-carbon emissions, they can give people reliable, secure energy supplies to meet their heating needs.

My questions are based on a report from Citizens Advice in July this year, titled System Critical: No Margin for Error in New Heat Network Rules. That “no margin for error” is why we are here interrogating this. As that reports outlines, and as the Minister said, since the rising price of gas after Russia’s invasion of Ukraine, we have seen serious problems in this sector.

My first question relates to what the Minister said about regulatory commencement on 27 January. The report says that Ofgem

“must outline the standards expected”

from providers, how it will act

“to improve systems and processes”,

and how it will deal with some of the terrible behaviour we have seen from some of the providers. Given that 27 January is not far away at all, my question to the Minister is: how prepared is Ofgem to act on this? We will of course already be in the middle of winter and people will already be accruing bills, which will be a real issue.

My other question relates to my personal experiences, particularly with Camden council estates. We know that many heat networks were installed in the 1960s and 1970s and have lots of problems, including that they are not controllable. People find themselves being heated even when they do not wish to be heated. There are real problems with controls, systems, leakage and all those kinds of issues. I am interested in the Minister’s view of how those issues will be addressed under this framework.

[Earl Russell (LD)]

My Lords, we support the Government’s fundamental ambition grow UK heat networks from the current 3% to 20% of the UK’s heat network demand by 2050. We share this ambition; we recognise that heat networks will play a pivotal role in helping to achieve our drive towards net zero and driving low-carbon energy growth. I particularly note that this is important in relation to the planned future growth of AI.

But, if this vision is to succeed, customers will have to have the absolute trust that heat networks are safe, reliable and cost effective. For too long, as the Minister acknowledged, this part of our energy system has been in the regulatory twilight zone. The half a million households on heat networks have often been left facing poor customer service, frequent outages and opaque billing. In many cases, people have found themselves trapped in contracts with extortionate charges and little way out. So this statutory instrument definitely goes a long way; it is long overdue and very welcome, because it helps to bring some order to that chaos. In the other place, the Minister himself noted the number of complaints that he personally had had about heat networks. So this is a significant step, and it places customers on a more equal footing with those in regulated gas and electricity markets, so we welcome it.

We also welcome the introduction of the special administration regime—SAR—for protected heat network companies. This is a vital safeguard. It ensures the continuity of heating and hot water supply even if the operator collapses, and it literally stops people being left in the dark and the cold.

We broadly share the plan to share the costs of the administration across the market. This seems a sensible approach and it strengthens market confidence by spreading that risk. When will the detailed regulations be published, and how will the Government ensure that these costs are shared fairly and equitably across the market, particularly in relation to the smaller operators? Will further consultations take place on that specific aspect of that sharing of the cost?

We welcome the new deemed contracts provisions, which are important because many people move to a house that is on one of these heat networks and have no choice but to sign up to them. So these deemed contracts are important and will help to ensure that people get a fair rate for their energy.

We fundamentally welcome the new powers that have been given to Ofgem. These give the regulator real teeth in this marketplace, with explicit authority to determine whether the charges are disproportionate, to investigate poor service, to extend the redress schemes and to support small businesses and micro-businesses. I recognise what the Minister said about how the definition around micro-businesses will be changed to make sure that it fits with the other regulations.

Nearly half a million households are on these networks and, to date, they have had little power or influence, and there have been problems. So what specific guarantees can the Minister offer that Ofgem will have both the additional resources and the new technical capacity to conduct effective investigations and issue binding directions where network operators are found to be guilty of unfair charging practices? Will the Government commit to publishing a transparent industry-wide methodology, showing how this issue of either disproportionate or not disproportionate charges is arrived at?

Generally, my questions further forward are about how, as we have heard, these regulations will come into force at the beginning of January—literally in a few weeks’ time. Considering the short amount of time before they come into effect, I ask the Minister to give an assurance about the customer redress scheme and the correction of technical error, and an assurance that Ofgem has the resources and capability to implement all these systems on time, because that is a concern.

Generally, these regulations are welcome. They bring order and clarity, and they help to bring confidence to this market. If this market is to grow, it needs this regulation, so we welcome this SI.